Australia-UK Trade Talks: What will cross the tables?

Australia’s vulnerability to trade bickering

In the wake of the prevailing crisis, China and Australia seem to be in an eye for an eye sort of position. Earlier Australia restricted Huawei from involvement in its national broadband network (nbn) and the rollout of 5G networks. Also, amid the COVID-19 pandemic turmoil, Australia pushed for a global probe into the inception of the virus spread with more countries joining the trail.

China is a significant trading partner of Australia which may possibly spurn products such as beef, wine tourism, and services. Certainly, this situation is expected to create a bitter relationship between the two.

Now the question arises: With this sour relationship with China, has Australia became vulnerable? Will any other country step in to fill the trading gap?

Also Read: Australia-China Escalating Tensions Upsurge- Grim Times Ahead?

Besides, Australia and UK, who are the opposite ends of the world, are in talks over striking a free trade deal in June. Both the countries are interested in seizing the new era of enhanced strategic and economic cooperation.

Earlier on 6th February 2020, UK’s Foreign Secretary, Mr Dominic Raab, made his first overseas trip since Brexit, where he exhilarated Britain’s aspiration for a free trade deal.

The deal process was expected to begin in April. However, due to coronavirus pandemic the progress is postponed and talks have started now after a delay of two months.

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UK-Australia trade deal will be a ‘good thing’ or a ‘great thing’?

Experts are suggesting that the deal is bound to create a win-win situation for both UK as well as Australia.

The Trade deal will ensure trade and investment relationship reaches its full potential by creating new opportunities for Australian exporters, remove barriers to trade in goods, and facilitate digital economy and innovation, modernised rules governing trade in goods, services and investment between Australia and the UK.

The deal may also pose opportunities for British architects and engineers to work easier and support the burgeoning infrastructure sector of Australia. Further, it will enhance the blooming two-way investment as UK currently is one of the major investors in Australia.

Also, reduction in regulatory barriers will increase participation of various small and medium sized businesses across the UK to trade.

Jaguar Land Rover, the British car maker could possibly benefit from the decreased tariffs and better access for their new technologies in the increasingly complex strategic environment.

The question is, will this deal be successful? Let’s see how well UK and Australia tune together.

Strong Investment Interrelationship - Australia And UK

The vivid relationship between the UK and Australia is rooted back to their strong foundations wherein both the countries have managed a sterling trade and investment interconnection. Let’s have a look at the various parameters that showcase their vibrant relationship.

• At the end of 2019, the level of foreign investment in Australia reached $3,844.5billion with the two leading investor countries contributing 44%: United States of America -$983.7billion (26%) and United Kingdom - $686.1billion (18%).

• At the end of 2019, the level of Australian foreign investment reached $2,953.1 billion, with the two leading investment destinations i.e. United States of America-$837.4 billion (28%) and United Kingdom -$507.4 billion (17%).

• At the end of 2019, Income debits recorded $117.6 billion. The leading countries to which income accrued were noted as United States of America- $29.0 billion (25%), and United Kingdom-$14.3 billion (12%)

• Besides, Income credits recorded $67.8 billion at the end of 2019. The leading countries from which income accrued were: United States of America $17.8billion (26%) and United Kingdom $5.9billion (9%)

.UK drumming up its own free trade partners

It’s not only Australia with whom UK is building a strong foundation of trade but there are few other countries as well. UK is exploring new partners for trade and investment outside of EU, possessing significant opportunity for various countries like US, Japan, Australia to capitalise on the benefits derived from an enhanced economic relationship

UK intends to pursue trade deals with other nations around the world post its exit from the EU. There have been long drawn talks with US, Japan which will help UK boost its presence across the world.

Embarkation of US and UK trade talks

US and UK started the first round of negotiations in UK-US Free Trade Agreement that is expected to last for ~ 15 days involving around 100 negotiators on each side.

Negotiations will address all areas including goods and services trade, digital trade, investment and supporting SMEs. The FTA will benefit every region and nation of UK including a committed chapter to help 5.9 million small businesses in UK.

Kick-start of Free Trade Agreement (FTA) Negotiations with Japan

On 13th May 2020, UK?published its negotiating objectives for a FTA with Japan in order to secure increased benefits for UK businesses trading with Japan.

The overall negotiating objectives would be:

• Surge in UK’s GDP along with facilitation of increased choices and lower prices for producers and consumers in UK, with new opportunities for Small and Medium-sized Enterprises (SMEs) and investors in UK.
• Increased resilience of UK’s supply chains.
• Security of UK’s economy through diversification of their supply chains.
• UK’s textiles?and clothing manufactures, and professional?and financial services?providers are expected as the sizable winners of lower trade barriers with Japan.

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Please note: $ used in the article refers to Australian dollar unless stated otherwise.